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Mapping the Modern Slavery Act Against the UN Guiding Principles

The UK’s Modern Slavery Act 2015 received Royal Assent on March 26, 2015. The Act is a critical step forwards in strengthening company disclosure on efforts to prevent some of the most serious abuses that exist in today’s global supply chains as a result of slavery, servitude, forced or compulsory labor and human trafficking.

However, the Act has raised questions for many UK companies about the relationship between its provisions, particularly Part 6, which deals with transparency in supply chains, and their broader responsibility to respect human rights. What exactly are they being asked to report on relating to modern slavery? And how does this new reporting requirement relate to what they are already doing to implement the UN Guiding Principles?

This short analysis by Shift aims to help companies and other stakeholders understand the relationship between the provisions of the Act and the expectations of the UN Guiding Principles. It is not intended as legal advice.

1. Context

The Act asks companies of a certain size to publish an annual “slavery and human trafficking statement” to disclose the steps the company has taken during that year to ensure that slavery and human trafficking is not taking place in any of its supply chains or in any part of its own business (Section 54(4)). Alternatively, a company can state that it has not taken these types of steps. Where a company has a website, it must publish the statement on its website (Section 54(7)). The statement must be approved by the board or its equivalent (Section 54(6)). Unlike a similar law in the state of California in the US, there is no requirement that companies conduct a certain amount of business in the UK for the law to apply. The Act applies if a company is carrying on business, or part of a business, in any part of the UK.

The law applies to a significant number of companies. In line with the general view expressed by both business and civil society stakeholders during the public consultation on this point, the Government announced on July 29 that the law applies to any company with an annual turnover of £36 million – the lowest of the proposed turnover thresholds. As a result, the Act applies to an estimated 12,000 UK active companies; that is more than the number that will be subject to the new EU non-financial reporting directive that is being transposed into UK law this year.

2. Analyzing the Modern Slavery Act through the Lens of the UN Guiding Principles

So what are UK companies that are subject to the Act being asked to do? Section 54(5) provides that a company’s statement “may include” the following:

  1. the organization’s structure, its business and its supply chains;
  2. its policies in relation to slavery and human trafficking;
  3. its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
  4. the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
  5. its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
  6. the training about slavery and human trafficking available to its staff.

The text is, admittedly, potentially confusing for those trying to assess its requirements against the expectations of the UN Guiding Principles. But in essence, paragraph (a) asks for critical context to enable a reader to understand the business; the remainder of the provisions reflect expectations set out under the UN Guiding Principles and apply them to the risks of slavery and human trafficking in a company’s own operations and in its supply chain. This is consistent with the UN Guiding Principles, which expect companies to seek to prevent or mitigate negative human rights impacts that are directly linked to their operations, products or services through their business relationships, even if they have not caused or contributed to those impacts.

In short, companies are being asked to disclose:

  • Evidence of a policy commitment in relation to slavery and human trafficking, as well as evidence of the effectiveness of the embedding of this policy specifically through training provided to staff;
  • The company’s human rights due diligence processes in relation to slavery and human trafficking in its operations and supply chains. This includes:
    • Identifying the parts of a company’s operations and supply chains where the risks of such impacts are the most salient, that is, where they would be the most severe in terms of the impact on people, were they to occur, and where they are the most likely to occur;
    • Explaining the steps a company has taken to assess and manage those risks and the effectiveness of its efforts, which are all parts of human rights due diligence as set out in the UN Guiding Principles.

The law does not specifically refer to information about companies’ remediation processes where negative impacts have taken place and the company has caused or contributed to them. (Remediation is the third element, together with a policy commitment and human rights due diligence processes, that the UN Guiding Principles expect companies to have place to meet their responsibility to respect human rights in practice.) However, the list of relevant information in Section 54(5) is non-exhaustive.

So companies can rest assured: the law does not introduce anything new. It is not asking for additional information beyond that which is already covered by the UN Guiding Principles. Rather, the Act is asking for evidence of specific policies and processes to prevent and address slavery, human trafficking and related severe impacts.

3. The Relationship between the Modern Slavery Act and Broader Human Rights Reporting

Companies and their stakeholders can now benefit from the UN Guiding Principles Reporting Framework – the first comprehensive guidance for companies to report on human rights in alignment with the UN Guiding Principles – in their efforts to meet the requirements of the Modern Slavery Act.

The table below illustrates the connections between the information asked for under the Act and the guidance provided in the UNGP Reporting Framework.

Modern Slavery Act, s 57

UNGP Reporting Framework


5(a) Information about an organization’s structure, business and supply chains


Reporting Principle A.

5(b) Information about an organization’s polices on modern slavery

Relevant information is contained under Question C1.

5(c) Information about an organization’s due diligence processes in relation to modern slavery in its business and supply chains

Relevant information is contained under Questions C2 through C5.
The four components of due diligence are: (i) assessing impacts, (ii) integrating findings and taking action, (iii) tracking performance and (iv) being prepared to communicate about a company’s efforts. Note: “Communicating” encompasses both formal reporting about the company’s efforts to manage its human rights risks, where appropriate, and communication with stakeholders through other means. Since the UNGP Reporting Framework itself provides guidance on formal reporting, its questions focus on the other main aspect of communication under C2 on stakeholder engagement.

5(d) Information about the parts of an organization’s business and its supply chains where there is a risk of modern slavery taking place, and the steps it has taken to assess and manage that risk

Relevant information is contained under Questions C2 through C5.

5(e) Information about an organization’s effectiveness in ensuring that modern slavery is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate

Relevant information is contained under Questions C2 through C5.

5(f) Information about the training on modern slavery available to its staff

Relevant information is contained under Question C1.1.
Note: The Implementation Guidance provides other examples of how a company can demonstrate that a policy commitment has been embedded into company practice beyond training.

The UNGP Reporting Framework provides additional resources on how companies can enhance the credibility of their disclosure in relation to their efforts to prevent and address risks related to slavery, human tracking and related impacts, particularly in terms of stakeholder engagement (see C2) and remediation (see C6).

Companies that use the UNGP Reporting Framework for their human rights reporting more generally, and for which slavery, human trafficking or related impacts are a salient human rights issue, will already have addressed the Act’s disclosure requirements by addressing the provisions of the Reporting Framework indicated above. In this way, companies’ disclosure on their efforts to prevent and address these severe impacts can become part of a broader, more coherent approach to human rights reporting.

Human Rights Due Diligence in High Risk Circumstances

This guidance is relevant for companies of all sectors but may be particularly helpful for public and private sector financial institutions. It draws on Shift’s work with the International Finance Corporation to explore the relationship between human rights due diligence and the IFC’s Performance Standards.

Summary

High risk circumstances are situations in which the likelihood of severe human rights impacts is greatest. Human rights due diligence (HRDD) consists of the processes that help businesses become aware of the actual and potential human rights impacts on people associated with their business and take appropriate action to prevent and address those impacts.

From the perspective of the United Nations Guiding Principles on Business and Human Rights (UNGPs), high risk circumstances should be the highest priority for company action since they present the greatest risks to individuals. In such situations, it is therefore especially critical for companies to conduct effective HRDD. Moreover, high risk circumstances for human rights often present high risk to the business as well, including commercial, reputational, investor related and legal risks. This convergence creates a constructive opportunity for human rights leaders within companies to gain the necessary buy in for identifying and addressing human rights risks and impacts.

While it is particularly critical for HRDD to be effective in high risk circumstances, those circumstances can also pose unique challenges for a business’ HRDD processes. High risk circumstances are more complex and fluid. There may be practical difficulties in engaging directly with some affected individuals and groups. The capacity to manage identified risks and impacts may be beyond the sole control of the business enterprise.

Key lessons and insights from business practitioners, further elaborated in this resource, include:

  • To understand the source of risk, and determine where there are high risk circumstances, companies can ask themselves a set of targeted questions, looking at the operating context, the nature of the company’s business relationships, the nature of the company’s business activities, and the types of people who could be affected by the company’s activities (or activities of its business relationships). A listing of these diagnostic questions is an annex in this resource.
  • Engage internal stakeholders in ways that: (a) raise awareness of high risk circumstances, (b) create expectations about identifying and escalating these types of risks, (c) ensure that due diligence is ongoing and responsive to changes in circumstances.
  • Engage external stakeholders in ways that: (a) are integrated into more robust strategies, (b) involve independent third parties in support of company efforts, (c) enable the business to push information to stakeholders and empower stakeholders to push information to the company.

Across these insights and examples, one crosscutting message becomes clear: while the tendency within many companies is to seek greater control over and protection of information as risks increase, in reality, enhanced transparency is critical for success.

UN Guiding Principles Reporting Framework

This resource is available in multiple languages. Click here to see which translations are available or in progress.

Whether your company is ready to report on its human rights management or is just trying to figure out where to get started, the UNGP Reporting Framework is a powerful tool for both performance and disclosure. Its 31 “smart” questions guide a company through the steps it should be taking to manage and report on its salient – or leading – human rights risks. The Framework was developed over a nearly two-year period through an extensive multistakeholder consultation process. | Learn more about the process of its development | Learn about our current reporting program

The UNGP Reporting Framework was developed through a joint initiative of Shift and international accountancy firm Mazars and is backed by an investor coalition of 87 investors with over $5.3 trillion assets under management, calling on companies to use the Reporting Framework.

The UNGP Reporting Framework has a dedicated website that includes the online version of the Reporting Framework and its two supporting guidances on implementation and assurance, as well as additional resources including an explanation of salient human rights issues, interviews with companies that use the Reporting Framework and a database of corporate reporting mapped to the expectations of the Guiding Principles.

How Can Businesses Impact Human Rights?

What do we mean by “internationally recognized human rights”? What is an example of a human right? How could a company’s activities infringe on somebody’s human rights? This concise table lays out what human rights are and gives concrete examples of how businesses can impact them.

Examples of internationally recognized human rights

The table draws on the publication by the UN Office of the High Commissioner for Human Rights, International Business Leaders Forum and the Castan Centre for Human Rights Law, Human Rights Translated: A Business Reference Guide (2008), which is an excellent source of additional information and guidance for companies.

Guidance for Companies on Respecting the Human Rights to Water and Sanitation

This guidance was developed with input from companies participating in the UN Global Compact’s CEO Water Mandate. | Learn more about the collaboration.
The summary below is excerpted from the resource.

Summary

This guidance aims to help companies (particularly heavy water users) translate their responsibility to respect the human rights to water and sanitation (HRWS) into their existing water management policies, processes, and company cultures.

What are the rights to water and sanitation?

  • The human right to water entitles everyone to sufficient, safe, acceptable, physically accessible, and affordable water for personal and domestic (household) use.
  • “Sanitation” is defined as a system for the collection, transport, treatment, disposal, or reuse of human excreta and associated hygiene. The human right to sanitation entitles everyone to sanitation services that are safe, socially and culturally acceptable, secure, hygienic, physically accessible and affordable, and that provide privacy and ensure dignity.

The main audiences for this guidance are staff with responsibility for human rights and those with responsibility for water stewardship within companies. Both large and small companies should find the guidance useful, but it should be particularly relevant for those with heavy water use in their operations.

In addition, the guidance should be of use to other stakeholders, including representatives of states, civil society organizations working on water and sanitation or on broader human rights issues, investors, international organizations, and others who have an interest in supporting, incentivizing, or requiring companies to meet their responsibility to respect the HRWS.

Translating Impacts on People Into Human Rights and Water Stewardship Terms

What is different when a company brings a human rights lens to its water management efforts? At its core, this means focusing on water-related risks to people rather than water-related risks to the business. This means that company efforts to understand their actual and potential impacts need to take full account of the severity of such impacts on “affected stakeholders,” as defined in the Guiding Principles. This could include workers, local community members, or other individuals or groups whose rights may be negatively affected. These impacts may involve the HRWS, but they may also have an effect on other human rights, such as the rights to health, life, and food. They may also have particular implications for individuals or groups who are at heightened risk of marginalization or vulnerability, who are entitled to additional protections under international human rights law.

Many impacts on the HRWS start as less severe social or environmental impacts, so it can be helpful to consider impacts as existing on a continuum. Preventing less severe social or environmental impacts can therefore help prevent negative impacts on the HRWS, as well as prevent negative impacts on other human rights.

Building the Capacity of OECD National Contact Points

Over a period of several years, Shift supported several National Contact Point (NCP) systems to help them better fulfill their role as part of the OECD Guidelines for Multinational Enterprises. The Guidelines are closely aligned with the Guiding Principles when it comes to the expectations of businesses to respect human rights.

This work included:

  • Supporting the Danish National Contact Point — the Mediation and Complaints-Handling Institution for Responsible Business Conduct — as it undertook a peer review process. This built on Shift’s previous work supporting the Norwegian NCP as it underwent a similar review in early 2014.
  • In 2014, Shift also provided expert support to the OECD Secretariat to conduct a range of capacity building workshops and activities with NCPs. Shift partnered with the Consensus Building Institute in this work. Specific, we delivered:
    • A workshop to build the mediation skills and capacity of the Nordic group of NCPs in Oslo, Norway;
    • The first “horizontal peer review” session among the NCPs at their annual meeting in Paris in June 2014, focused on strengthening good practices and sharing learning on handling the initial assessment phase of specific instances;
    • A capacity building workshop with the Middle East and North African group of NCPs (Egypt, Jordan, Morocco and Tunisia) in Rabat, Morocco;
    • A workshop to build the mediation skills and capacity of the Latin American group of NCPs in Santiago, Chile.

Embedding Respect for Human Rights in Key Company Functions

In 2014, Shift provided expert support to CSR Europe – the leading European business network for corporate social responsibility – to help its member companies understand how to effectively embed respect for human rights across their operations, and particularly in the key functions in human resources, procurement and risk. | See all our resources about embedding

Embedding can be thought of as the macro-level process of ensuring that a company’s responsibility to respect human rights is driven across the organization, into its business, values and culture. The Guiding Principles do not prescribe a single approach for how companies should embed their responsibility to respect; what is most effective will depend on an individual company’s context, including its corporate culture, types of business activities, and the positioning of different functions internally.

Shift has identified a number of critical elements for successful embedding, including:

  • Two-way communication between management and operational staff, including about challenges and how they can be addressed;
  • Setting appropriate performance goals for all staff to align incentives;
  • Cross-functional coordination and leadership;
  • Shared responsibility for outcomes, including those with responsibility for the activities or business relationships that may give rise to human rights risks;
  • Tailored operational guidance and continuous training;
  • Regular analysis of the company’s performance.

Shift’s support to CSR Europe involved research and webinars exploring these various elements of embedding, including identifying examples of how different companies have sought to embed the responsibility to respect in each of the three functions identified above. Shift also led a workshop for CSR Europe member companies on these issues in Brussels, hosted by Microsoft. The research and workshop discussions formed the basis of a public report by CSR Europe released in 2015. CSR Europe also drew on this collaboration in the production of their 2016 report Blueprint for Embedding Human Rights in Key Company Functions.

Building Capacity on the UN Guiding Principles in Ghana

Shift was pleased to support the Commission on Human Rights and Administrative Justice (CHRAJ) in Ghana in 2014 to advance business respect for human rights. CHRAJ is Ghana’s National Human Rights Institution with a mandate to promote and protect fundamental human rights and freedoms in Ghana. In implementing this mandate, CHRAJ is closely involved in national discussions about business and human rights and implementation of the Guiding Principles by the government and businesses operating in Ghana.

The presence of a number of extractive and agribusiness companies has brought heightened attention to preventing and addressing business impacts on society in Ghana. There is relevant experience on both the company and civil society sides engaging on these issues, and CHRAJ had identified opportunities to strengthen capacity across all three key stakeholder groups – government, business and civil society – in understanding and implementing the Guiding Principles.

In 2014, Shift and CHRAJ jointly organized three capacity building workshops for stakeholder groups on the Guiding Principles in Accra. Shift and CHRAJ collaborated with the Dutch NGO, the Centre for Research on Multinational Enterprises (SOMO), which hosts the OECD Watch network, in delivering the civil society capacity building workshop.

Our reporting program, begun in 2016, includes Ghana as a focus country — learn more about the initiative.

Supporting Norway’s Export Credit Agency on the Guiding Principles

“Shift has given us unique, expert insight and tools that have enabled us to pragmatically work toward our goal of effectively implementing the UN Guiding Principles.” 

Kamil Zabielski, Senior Social and Human Rights Specialist, GIEK

Shift is pleased to have worked closely with the Norwegian Export Credit Guarantee Agency (Garanti-instituttet for eksportkreditt-GIEK) (“GIEK”) to help it further align its approach to environmental and social due diligence with the Guiding Principles.

GIEK is a recognized leader among the OECD group of Export Credit Agencies (ECAs) in the development of policies and practices to manage environmental and human rights impacts. GIEK was among the first ECAs to adopt an explicit environmental and human rights policy and associated due diligence procedure.

Shift provided expert support to GIEK in 2013 in the development of these policies. In 2014, Shift worked with GIEK to explore how it could strengthen its stakeholder engagement and grievance pathways with regard to the transactions it supports.

Also see: our work with various financial institutions on the Guiding Principles | suppport to the Norwegian OECD National Contact Point